Companies typically have two options in raising capital to support their endeavors. They can issue debt, or they can issue equity. Debt is advantageous in that it does not directly affect the control of the company. However, the issuance of debt increases the risk shareholders carry due to debtors' higher priority for recovery in bankruptcy. Thus, shareholders are often wary of large issuances of debt. In addition, the issuance of debt typically results in an ongoing obligation to pay interest on that debt, limiting the flexibility of the company to use its resources. Failure to pay can result in default on the debt, which can potentially lead to bankruptcy.
Issuing additional equity has the advantage of not substantially increasing the risk of current shareholders. In addition, while many investors desire equity that pays dividends on a predictable basis, companies are not obligated to issue dividends on common or preferred stock. Failure to pay dividends may affect the stock price, but it will not lead directly to bankruptcy. Thus, from an operating perspective, the issuance of equity is safer for a company than issuing debt. Issuing additional equity can, however, dilute the value of the equity held by current shareholders and negatively affect the market for the company's stock.